Spotlight on Keynesian Economics
All Keynesians conceive of the State as a great potential reservoir of benefits, ready to be tapped. The prime concern for the Keynesian is to decide on economic policy -- what should be the economic ends of the State and what means should the State adopt to achieve them? The State is, of course, always synonymous with "we": What should "we" do to insure full employment? is a favorite query. (Whether the "we" refers to the "people" or to the Keynesians themselves is never quite made clear.) FULL ARTICLE
Comments (60)
Rothbard's first footnote greatly disappoints me. Are two people deciding to enslave a third moral? Absolutely not. Why did he say democracy is not evil?
Published: May 9, 2008 7:02 PM
"Why did he say democracy is not evil?" afruff23
Perhaps because the two can refuse to be enslaved by a fourth one, even if the third one accept to be enslaved !
Published: May 9, 2008 7:52 PM
"Why did he say democracy is not evil?"
Rothbard did not become an anarchist until three years later. He hadn't yet come to the conclusion that the state is evil.
What I find interesting is that Rothbard always refers to the state with a capital S. I wonder if there is any reason for that.
Published: May 9, 2008 9:34 PM
Further, Rothbard was 21 when he wrote this.
Published: May 9, 2008 9:43 PM
A price cannot be defined a "free act of voluntary exchange"; one has no choice but to buy bread or medical services. And it cannot be said that no benefit accruing to the individual from taxes, since they pay for services provided by the Governments. A theory based on a false presumption, cannot hold.
Published: May 9, 2008 10:46 PM
Bianca,
It seems odd that you would choose those two things to criticize in that they don't have much to do with Rothbard's criticism of the Keynesian model, but your remarks are still off the mark.
A person may need food or medical services to survive but any individual act of exchange is still voluntary in that in a free economy there many alternative sellers of food and medical services.
On the other hand there is no way to know if the "services" provided by government should be considered services at all precisely because the transaction is made under the threat of imprisonment.
Published: May 10, 2008 12:26 AM
I failed Macroecomonics twice, not b/c I didn't understand it, but b/c I never did the H.W or research papers. In retrospect, Keynesianism never sounded quite right. It's feels good to know of another (and better) economic philosophy. I heard about this philosophy and website, through Ron Paul. This article was enlightening. I think "dismal science" only refers to Keynesian economics, b/c there's hardly anything boring or dismal about this school of thought.
Published: May 10, 2008 2:16 AM
Democracy is a method of decision-making. It doesn't and cannot enslave anyone. Only people (and groups of people) can enslave others.
It is an interesting point Bianca brings up:
"If someone needs something as a natural human need for their survival, then is their exchange voluntary?"
Which supplier they trade with may well be a choice but their fundamental need for the good is not voluntary.
This is important when you consider that food, water, electricity and housing are some of the most regulated parts of our economy. Maybe western governments decided that the fundamental need for these goods males them involuntary and therefore the trade is not voluntary at a fundamental level so there must be safeguards in place to prevent market failures.
Published: May 10, 2008 3:49 AM
Keynsian Economics was also well criticised by mainstream economists aswell.
Published: May 10, 2008 3:58 AM
@ Owen who said "Democracy is a method of decision-making. It doesn't and cannot enslave anyone. Only people (and groups of people) can enslave others."
Exactly, it's just like the phrase "guns don't kill people, people kill people", and one should not kill people. Therefore democracy is bad.
"Which supplier they trade with may well be a choice but their fundamental need for the good is not voluntary."
It doesn't follow from this statement that these "fundamental needs" are rights, or that a central collectivistic actor may use force to "secure" these alleged rights.
"This is important when you consider that food, water, electricity and housing are some of the most regulated parts of our economy. Maybe western governments decided that the fundamental need for these goods males them involuntary and therefore the trade is not voluntary at a fundamental level so there must be safeguards in place to prevent market failures."
This is just a 'rational' reconstruction and (a really bad) justification for the status quo. Whether governments held these kind of theories or not sure don't make them valid theories. You're leaping from IS to OUGHT. These safeguards you mention, are in practice actually the failures within the system.
Published: May 10, 2008 9:00 AM
I am curious as to how we are measuring what "the most regulated parts of our economy" are. I would be willing to bet that "food" isn't one of them - if it was, I would expect the experience of getting food to be more like the experience of going to the DMV, or dealing with the IRS, or dealing with the local school board, or my "free" health care that I get through the military. As it is, I can buy fresh fruit any time I want, or buy fried chicken without getting out of my car.
And yes, you do have a choice about buying bread and medical services. You can choose who you buy from, where you buy from, what type you choose to buy. You can make your bread, you can ask for bread, you can even eat rice instead. And what medical services are we talking about? Even treatments for major illness involve choice. What choice did you make about insurance, which hospital are you going to, which doctor? (To be fair, with all the wonderful regulation in the way, there are far lesses choices in the purchasers hand).
Anyway, after rereading a particular post, I get the feeling someone is trolling.
Peace
Published: May 10, 2008 3:58 PM
What might be meant in the case of food is subsidies for suppliers, regulation by the FDA &c. This is rather inconspicuous, but it's there nonetheless.
Published: May 10, 2008 4:54 PM
" 'Which supplier they trade with may well be a choice but their fundamental need for the good is not voluntary.'
It doesn't follow from this statement that these "fundamental needs" are rights, or that a central collectivistic actor may use force to "secure" these alleged rights."
That is true, but that is not what is being said either. What Owen said was simply that your choice of supplier is a hollow choice if you must choose between the suppliers or death. If you cannot choose to not take part, you have submit to the common will of the suppliers not by your own choice. So as a group the suppliers have considerable (if not absolute) power over you, for no fault of your own (and most often not theirs either), and you in turn have no power over them, save for what you can get by turning them against each other.
Published: May 10, 2008 8:25 PM
deAZ
i never mentioned medical services.
Food is considered as a whole industry by governments and you will find that when the *$#*& hits the fan any and every government in the world will act swiftly and heavily to ensure the food security of its citizens. It comes second only to national defence and maybe oil.
Arend:
Basic necesities are fundamental rights according to the conception of rights in each persons head. It just so happens that Western governments currently conceive basic necessities as fundamental rights. have a look for yourself, or else why do they tax the rich to feed ot poor?
Valid theories are only right or wrong inside the head of each person. There is no universal set of human rights that are immutable. Only what you think or i think. The sets of rights that currently underpin national laws in countries are closer to my set of rights than yours, so you could say that I am more 'mainstream' than you.
Published: May 10, 2008 8:29 PM
"you have submit to the common will of the suppliers not by your own choice"
That was funny. The "common will of the suppliers." Who knew? I think I know that answer to that. laughs.
Published: May 10, 2008 8:37 PM
Greg...laughs (nervously) because he actually has nothing to add.
Published: May 10, 2008 8:40 PM
"Basic necesities are fundamental rights according to the conception of rights in each persons head."
I suppose if one is ignorant and uneducated about the social concept of rights, one could, in their own head, believe that sort of nonsense.
Published: May 10, 2008 8:42 PM
Greg believes his concept of rights is 'above' that of others...based on...nothing!
Now I am the one laughing! He has obviously never looked up the dictionary definition of 'rights' to find that it makes no mention of his name nor any 'standard' set of rights.
He he!
Published: May 10, 2008 8:55 PM
I'll just toss this in for what it's worth: natural law theory gave man the right to steal in order to feed himself and his family. The theorists place many restrictions on the act and required the thief to pay back the owner when he was financially able, but natural law recognized the right to life as superior to property.
Published: May 10, 2008 9:10 PM
In my head I have the fundamental right to murder all relativists. They cannot disagree, can they?
Published: May 10, 2008 9:16 PM
Daniel:
There are many people like you - most of them are caught eventually and get either the electric chair or are killed whilst being apprehended. If you are really lucky you could get to spend the rest of your psychotic life in a state sponsored hotel.
But yeh, you can think and do what you like...but you will face the consequences from those more powerful than yourself.
Published: May 10, 2008 9:28 PM
Owen has been owened because he has chosen to give up his property rights for the common good.
Published: May 10, 2008 9:44 PM
Poor Daniel,
Still cannot see how minimal redistribution works. It takes a minimal amount from everyone in order to help those less fortunate.
It only requires a proportionate relinquishing of property rights in order to achieve minimla redistribution. Apart from this all property rights are intact.
How are those murders coming along? Can you hear any sirens?
Published: May 10, 2008 9:53 PM
I've studied Keynesianism (always with confusion, most of the time with distaste that grows and grows) for decades, but I don't believe I've ever seen an explanation of it that approaches the succinctness of this one.
Maybe it's just from having read so many over the years. I think I'll check Wikipedia and one of the encyclopedias of economics (again) to see in detail how they compare with young Rothbard's incomparable effort.
Published: May 10, 2008 9:56 PM
So morality is dictated by those with the most power/guns? Please confirm.
Published: May 11, 2008 1:05 AM
Daniel:
Finally you wake up to reality of the world. How old are you? I mean did it take this long? On which planet have you been living - the one where people all play together and hold hands?
Have a look out your window or watch CNN for a few minutes, do you see any significant rights or laws which are not backed by force? Religions and minority cultures are a huge moral force and always have been but only to those within their flock...unless they can control the means of force.
Published: May 11, 2008 1:31 AM
I have to side with Owen here. All these crybaby Iraqi's who have had family members killed by our bombs have no reason to complain, morally speaking. Don't they realize we have the bigger guns?
Published: May 11, 2008 6:39 AM
Owen and William Kristol,
So might makes right. Maybe someday you and those who think like you, when strolling down the street, will meet up with a bunch of thugs who decide to press their advantage and pound your heads into the pavement.
This law of the jungle, besides being morally reprehensible, will produce a society no more advanced than that of a jungle.
Lord Acton was absolutely correct when he stated that power corrupts.
Published: May 11, 2008 7:51 AM
Owen is an evasive worm. Rettaw, you misinterpret Owen. He does mean to say that needs generate rights, after having said that morals are entirely subjective. Read him properly. Your own points also make no sense. "Collective will"? There is no such thing. Owen, besides being a coward, utterly ignorant of philosophical principles (asserting what has to be argued for, and what even some brilliant philosophers have failed to demonstrate), is also a criminal - but a toothless one. He contradicts himself on so many points that he is not worth listening to. Incidentally, it is usually naive students who buy into relativism.
Published: May 11, 2008 8:03 AM
William is being sardonic, I trust. I still want Owen to demonstrate whereby he came to the axiomatic truth that "necessarily, all morals are relative". He ought to demonstrate less apodicticity.
Published: May 11, 2008 8:05 AM
William, if you were being sardonic, my apologies.
Published: May 11, 2008 8:53 AM
Inqui:
Apologies if I chose my words poorly. With "collective will" I meant to say the set of overlapping means and principles that any collection of suppliers of the same goods will share.
How big this set is, and how much of the total space of means and principles that lies in it depends of course on the particulars of the suppliers your are considering. However it is only in an extreme case that the set can be completely empty, for this would mean that the suppliers of the goods somehow do not share the same basic limitations physics provides on the production of the goods.
So then whenever you seek to buy this commodity (as you must or face certain death; this was the fundamental assumption), you cannot freely choose what principles and what means your purchase will support, since the suppliers always share at least some between them all.
Published: May 11, 2008 12:25 PM
...because you're exchanging one good for another, and that is as far as the exchange goes. One could apply the above in reverse, stating that suppliers have little control over what consumers do with their goods, so they're not really freely supplying the goods. That is silly.
Published: May 11, 2008 12:40 PM
Owen, keep posting. We badly need a clown on Mises blog! You are doing a good job at it. :)
Published: May 11, 2008 12:47 PM
The question "If someone needs something as a natural human need for their survival, then is their exchange voluntary?" is nicely addressed by Michael A. Clem in the other thread:
http://blog.mises.org/archives/008093.asp#comment-267553
Published: May 11, 2008 3:08 PM
Inquisitor:
You are wrong because the need of consumers is for survival but the need of a supplier is for profit. Until a single exchange means the difference between life and death for the supplier (impossible) then the statemeent still holds.
Disappointed that you cannot make a valid point?
Published: May 11, 2008 6:46 PM
Inquisitor:
You are wrong because the need of consumers is for survival but the need of a supplier is for profit. Until a single exchange means the difference between life and death for the supplier (impossible) then the statemeent still holds.
Disappointed that you cannot make a valid point?
Published: May 11, 2008 6:47 PM
Inquisitor:
You are wrong because the need of consumers is for survival but the need of a supplier is for profit. Until a single exchange means the difference between life and death for the supplier (impossible) then the statemeent still holds.
Disappointed that you cannot make a valid point?
Published: May 11, 2008 6:47 PM
"Inquisitor:
You are wrong because the need of consumers is for survival but the need of a supplier is for profit. Until a single exchange means the difference between life and death for the supplier (impossible) then the statemeent still holds."
The only "need" that enters the equation is on the one hand of the supplier and the other hand of the consumer to satisfy their wants by consuming the good in question, red herrings notwithstanding.
Published: May 11, 2008 7:13 PM
*consuming/acquiring
Published: May 11, 2008 7:29 PM
Owen'ed> "He has obviously never looked up the dictionary definition of 'rights' to find that it makes no mention of his name nor any 'standard' set of rights."
Thanks. This is a wonderful tip. I wish you could have told me before I went to college. Dictionary's are so much cheaper than college and all the time I spent.... Argh!
Published: May 11, 2008 7:31 PM
Roger M> natural law theory gave man the right to steal in order to feed himself and his family.
I presume you also include the hard condition of "no other options available." But you would still be wrong in that case; "Natural Law" gives no such right. Why?
"Natural Law" and then "rights" are social concepts, and make some presumptions about what a working society entails. Social concepts are the explication on how the interpersonal rules of conduct function, or "ought" to function. But a person or family unit, for example, who really is in a "critical phase," where their very survival is at stake, are not any longer in a state of society, they are in a state of nature. Strictly speaking, Natural Law and natural rights no longer apply. In a state of nature, the rules of society (Natural Law and natural rights) are irrelevent because they are useless in the prime goal of a life to continue on. So where you are "wrong" is in misapplication of social theories (rights) to a non-social environment.
Now it so happens that "happenings" in a state of nature, do end up getting post-judged by a society (by the society's courts, and even just popular opinion). The happenings of "lifeboat situations" are classic in this regard (as ar war-crime tribunals). What that knowledge of post-judgement does to the people who consider themselves to be at or near a state of nature is to probably put some inhibition towards engaging in acts that the actor knows will come under scrutiny in post-judgment.
Examples of states of nature abound. An example of a state of nature would be a woman who was threatened with rape and perhaps death. The support of society (getting the cops there to intervene, for example) may be unrealistic in the temporal domain. Since the woman's life is threatened in an immediate way, and the help of society is not at hand, she would be in a state of nature. She could kill the offender. It is a case where killing is not murder. It will be post-judged by society. War is another case of a state of nature. (Or claimed to be, and again, "war crimes" are post-judged.)
I recommend reading The Case of the Speluncean Explorers, by Lon Fuller, a natural law theorist. It is on the web. Going back to you original posit: It is not a matter of "rights"; it is a matter of determining if a state of nature existed, was avoidable, and what the consequences will be in spite of the strength of the state of nature case. "Society" will always post-judge. But there are no rights in a state of nature. It would not even be "stealing," it would simply be surviving.
Published: May 11, 2008 8:15 PM
"But there are no rights in a state of nature. It would not even be "stealing," it would simply be surviving."
Exactly. There are no rights in a state of nature, only force and counter force.
Published: May 11, 2008 10:10 PM
For the consumer it is a need, the producer a want.
Inquisitor cannot even understand that! (eyes roll)
Published: May 11, 2008 10:34 PM
And what are they? What are our needs and in what quantities do we require them? May I suggest a plot of our aggregate needs against the average salary of the capitalist pig so that we may democratically collect what is rightfully ours. We are so blind, please do tell!
Published: May 12, 2008 3:25 AM
negativist:
Have a go yourself - name some resources or actions, which if not consumed or done by any human being on the planet within the next 3 months, would cause that person to certainly die.
Then you have your answer! All you needed to do was think a little! That wasn't so hard was it?
Published: May 12, 2008 3:33 AM
Let your eyes roll until they fall out of your empty skull for all I care. Nowhere in subjectivist economics is there a distinction drawn between needs and wants on part of the consumer/supplier. Both can either be fulfilling wants or needs, according to how they rank their preferences.
Published: May 12, 2008 8:02 AM
"Exactly. There are no rights in a state of nature, only force and counter force."
You're falling into a trap you don't want to be caught in. The above argument is a Randian flavoured argument. It by no means coincides with your subjectivist tripe.
Published: May 12, 2008 8:04 AM
"Let your eyes roll until they fall out of your empty skull for all I care."
I would so watch that on Youtube.
Published: May 12, 2008 10:30 AM
I will claim that cellphones are such a need. Without a cellphone, X may not be able to obtain assistance in a life/death situation. In addition, subscriptions to NYT would be needed to keep the public informed.
Now I could go on, and there may even be some good arguments to show that this would in fact save lives. However, I hope you will have already realized the absurdity of what such a policy would entail. Point being, if you start out with false premises there is no accounting for what you can conclude.
We are assuming rational beings with profit-maximizing behaviour. What follows is efficient allocation scarce resources and awareness of incentives and opportunity costs. Time and time again Keynesians, among others, have violated these principles. You may choose to do so as well, but be more critical before laying the blame on "unfettered markets."
Published: May 12, 2008 12:23 PM
Positive rights contradict the very notion of rights. If positive rights to food exist, then my negative right to not be enslaved must not exist. But if a negative right to not be a slave does not exist, then rights by definition do not exist, and we're left with a world in which might makes no wrong. The law of non-contradiction proves conclusively that, therefore, either rights do not exist at all or that only negative rights exist. Either way, positive rights cannot exist.
You can accept voluntaryism or ethical nihilism. There is no middle ground.
Published: May 12, 2008 6:10 PM
Positive rights contradict the very notion of rights.
There are a few positive rights that are valid if you first assume that some kind of guvmint is okay. Two that come to mind under the current (US) paradigm: (1) habeas corpus, and (2) trial by jury.
Both of those are supposed to be explicit checks on the guvmint procedurally taking away someone's negative rights.
Published: May 12, 2008 6:30 PM
There are no such thing as negative rights except the ones you believe you are entitled to defend yourself against someone else who'd take them away from you.
Published: May 12, 2008 7:20 PM
SAM> There are no such thing as negative rights except the ones you believe you are entitled to defend yourself against someone else who'd take them away from you."
Apparently civil enough, but you certainly broke the "intelligent" half of the posting rule. Could you be bothered to think things through before you post? Do you care what people will think of you? It is common courtesy not to waste people's time reading tripe like that, although it was very short, as a consolation.
Published: May 13, 2008 12:19 PM
^What he said..
Published: May 13, 2008 12:28 PM
Couple items I didn't understand:
"We have left out two factors that also determine the level of expenditures. If exports are greater than imports, the total amount of expenditures in a country is increased, hence national income increases."
Isn't it the reverse? If you export more than you import, wouldn't your total expenditures decrease, not increase?
"Let us assume that aggregate income = 100, consumption = 90, savings = 10, and investment = 10."
Why don't these add up? I thought earlier he says that income is equal to the amount
spent+ saved+invested.
Or is this a flaw in keynes model that Rothbard is trying to point out?
Published: May 13, 2008 4:36 PM
Owen,
You are wrong because the need of consumers is for survival but the need of a supplier is for profit.
Unless you are able to poll every living human being, there is no way you can know the motivations of consumers. You are simply assuming that consumers consume merely for survival. As well, you cannot know for sure the motivations of suppliers.
The fact is that both consumer and supplier are actually relative terms, since a consumer can also be a supplier, and a supplier is definitively a consumer.
Still cannot see how minimal redistribution works. It takes a minimal amount from everyone in order to help those less fortunate.
Owen, this statement begs the question - define "minimal amount", before trying to argue.
It only requires a proportionate relinquishing of property rights in order to achieve minimal redistribution.
The problem here, Owen, is in defining what a "proportioned" relinquishing of property rights is supposed to be. Who sets up that proportion, and why?
Apart from this all property rights are intact.
This statement is illogical, Owen. Intact means not touched, and a "proportional relinquishing" of my property rights means that my right is NOT intact. A person either has a right to keep his property, or he has not.
Published: May 13, 2008 5:55 PM
He might mean expenditures by foreigners. In that case, national income would rise.
Published: May 13, 2008 6:00 PM
Owen,
Which supplier they trade with may well be a choice but their fundamental need for the good is not voluntary.
This is incorrect - a person can make a choice, even if that choice means going without satisfying a need. "Involuntary" means that the person is not acting, merely reacting, like a robot.
This is important when you consider that food, water, electricity and housing are some of the most regulated parts of our economy.
The reason they are regulated is entirely political and stems from expediency, nothing to do with the need itself.
Maybe western governments decided that the fundamental need for these goods makes them involuntary and therefore the trade is not voluntary at a fundamental level so there must be safeguards in place to prevent market failures.
Owen, your statement is illogical - first of all, you are begging the question by assuming that a need makes a transaction involuntary, but it does NOT - an acting person can choose. "Involuntary" either implies programming (like instinct in the case of animals) or direct coercion from an outside force. A person may need food or water but that does not mean a person is forced to purchase or forced to get food or water. The second part makes even less sense: how can regulation or safeguards prevent market failures?
Basic necessities are fundamental rights according to the conception of rights in each person's head.
Which renders the concept meaningless, if it can be whatever each person wants. You avoided the issue one time, by calling me names, remember? I asked you to define "basic necessities", because what I think is basic for ME may not be for you, and so on.
On the other hand, just because you name something a "basic necessity" does not mean ipso facto everybody is entitled to it: Someone has to be willing to produce it. There are things you might call "basic necessity" that did not exist before someone produced it, so how can someone be entitled to have it?
It just so happens that Western governments currently conceive basic necessities as fundamental rights
That is irrelevant.
Have a look for yourself, or else why do they tax the rich to feed the poor?
Governments do not tax the rich to feed the poor, that is a lie or a fantasy. Governments tax people to pay for government, first, and to dole out favors, second.
Valid theories are only right or wrong inside the head of each person.
Owen, this is not true. A valid theory must be either rational or tested against reality, depending on what the theory is trying to explain. If it depends on what a person guesses, then it is not a theory, it is an opinion.
There is no universal set of human rights that are immutable.
Owen, there are: the right not to be killed, the right not to have my property taken by force, the right to be free. All stem from rational deduction from the self-ownership principle, and not merely wishful thinking.
The sets of rights that currently underpin national laws in countries are closer to my set of rights than yours, so you could say that I am more 'mainstream' than you.
Your argument is fallacious - just because you believe your thinking is mainstream does not mean your beliefs are valid or correct. You are making an error called arguing from popularity. By the way, laws have little to do with rights - laws exist to limit or prohibit, whereas rights are not prohibitions, but human conditions. People can enact laws to protect rights, but laws themselves do not confer a right to a person in a rationally valid way. If a law gives entitlement of something to someone, it does it by coercion alone and not by reason.
Published: May 13, 2008 6:41 PM
8(
I guess you felt I made a cheap tautological statement then Greg? What I said meant (without being circular I hope) is that right that are personal statement aren't really rights but rather they're wishful thoughts or abilities. If a Libertarian says "I have the right to refuse paying taxes" yet pays their taxes on time then that statement was wishful thinking. If another Libertarian is very good at repelling tax collectors then it is an ability to repel any and all tax collectors.
Published: May 13, 2008 10:03 PM